GlobaLIES This!

GDP GDP GDP GDP GDP GDP GDP GDP GDP GDP GDP GDP GDP GDP GDP GDP GDP GDP

GNP GNP GNP GNP GNP GNP GNP GNP GNP GNP GNP GNP GNP GNP GNP GNP GNP GNP

These two acronymns are what we hear from economists and politicians all the time. GDP mostly replaced GNP around 1990. GDP is Gross Domestic Product and GNP is Gross National Product. The difference is GDP takes foreign investment into account but that is irrelevant to this discussion.

GNP_blog

This discussion deals with what you RARELY hear and what you NEVER hear. What you rarely hear and may never have heard is NDP or NNP. Net Domestic Product and Net National Product. These differ from Gross because our economists subtract DEPRECIATION. The robots that General Motors uses to manufacture automobiles wear out and eventually have to be replaced. These robots are what economists call CAPITAL GOODS. Capital goods have to be replaced for the factories to keep running so the government allows businesses to deduct this depreciation from their taxes according to IRS schedules and economists subtract this from GDP to compute NDP. You may have noticed that the blog did not mention NNP/NDP.

The economists also claim that this depreciation is small each year so they normally don't talk about it at all.

What you never hear is that the equation the economists are using is WRONG!

When Joe Blow consumer buys an automobile it gets added to GNP. But his car wears out just like the automobiles purchased by car rental companies which file their depreciation with the IRS. Just because depreciation doesn't get filed doesn't mean it doesn't happen. The laws of physics don't care about money or if we get our equations wrong.



The purchase of capital goods, like automobiles by car rental companies, increases GNP and is represented by arrow A. This increases NNP as indicated by arrow A'. The B and B' arrows show the same effects resulting from the purchase of durable goods by consumers. Things are a bit more complicated for the C arrow. Since depreciation is subtracted from GNP, C' points down reducing NNP. This results in an equation with two arrows on the left side pointing up but only one arrow pointing down. These arrows on the equation make it obvious that something is missing. Since Depreciation in the upper equation refers to CAPital goods it is represented by Dcap in the lower equation with the same C arrow. The variable Dcon is added to represent Depreciation of CONsumer goods. The D arrow represents increases to Dcon which is inside the parentheses with Dcap so it is also subtracted. D' arrow on the left side of the equation points downward with C' resulting in two down arrows to balance the two up arrows A' and B'. This will result in a value very different for, NNP, from what the economics profession has been getting and not telling us about. I conservatively estimate that Americans have lost TEN TRILLION DOLLARS in depreciation of automobiles since 1945.

This creates a problem for the economics profession. If they say this equation is correct how do they explain getting it wrong since World War II? If they say it's incorrect how do they explain what is wrong with it to all of the people that know how to do grammar school algebra? So most of them say nothing.

THE ECONOMY is not just the flow of money. It is the WEALTH, tangible and intangible, of every economic unit in a society. A man with $10,000,000 in a safe deposit box could have ZERO income for the remainder of his life but live quite well. He might be eligable for welfare benefits because his lack of income would put him below the poverty line. People with no wealth must have income for food and rent so they are coerced into laboring for those with wealth. Why hasn't accounting been mandatory in all of our highschools since WWII? Would the economies of all of the advanced nations be in quite different states if accounting had been mandatory? How many people with economics degrees are employed by companies encouraging people to go into debt for things which depreciate for the economists to ignore?

These diagrams of GNP are what economists use to represent an economy. The one on the left is mine and the one on the right is from the blog. They are functionally the same but some names are different and arrows are in different locations. Firms on the right are business on the left and households on the right are work/con for worker/consumers on the left. The Goods & Services arrow is on the top in the right diagram and on the bottom in the left. Labor on the left is factor services on the right.



This is GNP minus the depreciation economists subtract but rarely discuss outside of professional economic circles, called NNP.



This is GNP minus all of the depreciation, including what consumers loose.



Maybe we should call it DNW for Delta National Wealth, change in national wealth.

On an international level this brings up the subject of planned obsolescence. Airplanes from World War II, the Spitfire, P-51 Mustang, P-38 Lightning, could fly at 400+ miles per hour. These planes were designed without electronic computers. How is it that 36 years after the moon landing automobile companies with computer aided design and computer aided engineering need to redesign machines that roll along the ground at less than 130 mph? If cars cost more because they are redesigned each year aren't the countries that import all of their cars losing vast amounts of wealth? Shouldn't the political leaders be aware of this ignored depreciation? How well do most politicians understand economics? FDR didn't understand what John Maynard Keynes was talking about.

FDR & Keynes

Mentioning FDR and Keynes brings up the subject of the Depression. The Depression was seen by many as a failure of Capitalism. Since govenrment officials did not understand how the economy worked many of the things they did to cure the Depression actually made it worse. Keynes developed the concepts we now refer to as MACROECONOMICS which included the concept of Gross National Product. Keynes told FDR to borrow money and spend it to "prime the pump" of the economy to generate cash flow. This made no sense to FDR and he didn't do it until World War II forced him to. The success of the American economy during WWII is taken as proof that Keynes was correct.

Life and technologies have changed greatly since that war. Keynes did not live in a world where people watched television for 30 hours each week. The first television commercial was broadcast in the US in 1941 and Keynes was in England and England was at war. TV didn't become significant until after Keynes died in 1946. The influence of Pavlov and von Neumann have grown in the world since Keynes followed the long run.

Vulcan Technology

Vulcan Economics

John von Neumann's 1944 book with Oskar Morgenstern, Theory of Games and Economic Behavior was a landmark of twentieth century social science. Interestingly von Neumann is also Nfamous in the computer industry. Nfamous because most people never heard of him even though almost all computers are von Neumann machines. Someone joked that von Neumann was actually an outer space alien who had trained himself to perfectly imitate a human being in every way. Computers have affected the economy because they made the management of huge corporate and government bureaucracies possible. They have also triggered rapid stock market fluctuations due to program trading which began in the 80's. Now the cyber-economic influence is global due to the World Wide Web. Human beings are information processors and their behavior can be affected by the information they receive, be it accurate or inaccurate. Plenty of people have a vested interest in hiding important information and in a "free" media saturated society the way to do that is to distribute lots of distorted information. The more things change the more they remain the same.

"All warfare is based on deception." - Sun Tzu, 500 BC

How much did the world change from the publishing of THE COMMUNIST MANIFESTO in 1848 to Marx's death in 1883? The American Civil War was fought and lost, or won depending on your perspective and the transformer was invented in 1876. A pretty good argument could be made that the invention of the transformer was more important than the Civil War. It is an electrical component fundamental to the manipulation of electricity and our modern society could not run without it. Technology has changed society and the workings of the economy. It is the perpetuation of 19th century ideas that partly keeps us from using that technology to solve our problems.

There is no reason why everyone should not know accounting and be able to do it on inexpensive von Neumann machines. This would result in von Neumann technology affecting the von Neumann theory of games. Changing the quality of play of millions of people would fundamentally affect the game. Global von Neumannism could make Marxism and conventional Capitalism obsolete. With all of their talk about globalization why aren't any economists suggesting this?

"Economics is extremely useful as a form of employment for economists." - John Kenneth Galbraith blkdevillolbighairlol

umbrarchist

Did you edit this article?

Sorry read it twice and although in terms of paragraphs I can understand, as a whole I am lost and truly lost in relation to the title.

I wrote it. It is a compression of almost 30 years of thought on the subject. It was triggered by this thread:

http://www.blackchat.co.uk/theblackf...m27/12054.html

I'm talking about technology and economics. I don't know what your attitudes about Marxism and Capitalism are. Marx died almost 50 years before the concept of Gross National Product was developed by Keynes.

In 1998 a 300 MHz computer cost $3000. Suppose you bought such a computer that year for home use. Then $3000 was added to GNP because of your purchase. In 2001 that computer would have been worth about $500 so you would have lost $2500 in DEPRECIATION. Your Net Worth went down $2500 even though you didn't file it and economists don't subtract it from GNP. All depreciation of consumer goods is ignored.

Although the title implies I'm debating between Marxism and Capitalism, I am actually saying they are both wrong. We have been victims of an obsolete debate all of our lives.

The capitalist economists are lying and Marxists haven't figured it out and told us.

Umbrarchist

Haven't figured out what?

And what excatly are the 'capitalist lying' about?

Marx was talking about his own life time, with some prediction of how things would go (and no one as proved him wholly wrong there...

So what is the point you are making, sorry I was never big on the whole GDP ect stuff, so you will have to explain in terms a non economist would understand.

If it helps I consider myself a 'marxist'

Suppose you have a 55 gallon drum sitting next to a lake. There are 2 men on either side of the drum using beer mugs to put water into the drum. An economist stands nearby counting and recording the number of mugs of water going into the drum each minute. So the number of mugs going in each minute is the GBP, Gross Barrel Product. BUT! There are 2 holes at the bottom of the barrel. One man is a capitalist and the economist has a gauge measuring the water coming out on his side. He subtracts this and puts it in his written reports to the government and other economists but most of the time he never talks about it.

There is water leaking out of the other hole for the worker consumer, but it is not measured. It is ignored. They pretend it doesn't exist.

Obviously the amount of water in the barrel is affected by the leakage from both holes. The equation that I am using is intended to account for both.

I haven't heard any Marxist sayng accounting should be mandatory in school. I once had a conversation with a man selling THE WORKER'S VANGAURD newspaper about it but he appeared to think it wasn't important. Everyone doing their accounting properly would notice their losses due to depreciation even though they can't deduct it from taxes. It could mean more people thinking about depreciation BEFORE they buy.

umbrarchist

i WILL GET TO THIS AND HAVE BOOK MARKED IT

thanks for the link

I read much of the thread and did searches on Marx and Smith. No hits.

Adam Smith disapproved of what he called joint stock companies. A joint stock company is what we now call a corporation. In 1886 the US Supreme Court decided that a corporation was a "person" and deserved similar rights. It was a case involving Santa Clara County and a railroad. Neither Marx nor Smith knew about a corporation being a PERSON. A corporation with tens of thousands of stock holders where no one owns as much as 1% isn't PRIVATE OWNERSHIP it is COLLECTIVE OWNERSHIP. Communism for the RICH!

I think the term CAPITALISM does not accurately apply to the system we have in the US and much of the world today. I think what I call CORPORATE CONSUMERISM was being phased in around 1900.

Freudian psychology didn't get started until after Marx's death. The 1st television commercial wasn't broadcast until 1941. How much psychological knowledge is put into commercials today to get consumers to overconsume?

We have obesity and tremendous credit card debt.

Adam Smith would not be impressed.

umbrarchist

^Hup

Interesting.

Umbrarchist.. I'm currently working on a project and I could use your input, later on when I finish. At your earliest convenience(if you want), please pm me some contact information(email would be suffice).

Nice

Umbrachist

Can you explain Surplus Value Theory?

Umbrachist

Can you explain Surplus Value Theory?



Maybe. LOL

The problem is explaining some theory with some simplified example that hardly ever exists in the real world.

The manufacture of some product requires labor and some production facility, i.e. factory. So producing 100,000 widgets costs $200,000 in labor. The widgets are sold for $400,000 so there is $200,000 in GROSS PROFIT. That might be seen as SURPLUS VALUE. But the factory cost $2,000,000 and the owner only had $500,000 so he had to borrow $1,500,000 and he is paying interest on the loan. So some of that gross profit he keeps and some goes to pay on the loan and they have to make still more widgets to pay it off.

So suppose he pays off the loan and he keeps selling widgets at $4 each. He could raise the workers salaries, but will he?

This gets into the supply and demand concept for labor. What if widgets start being imported for $3? The economy is very big, complicated and interactive. But how consumers spend their money over the decades can have long term effects. I can only wonder what the US would be like if accounting had been mandatory since 1945. I saw an article in a magazine some years ago that only 13 states required that some kind of financial information be taught. A few more states had guidelines but not requirements.

Marx did not live in an age of CONSUMERISM. The problem has not been scarcity since 1945 it has been wasted abundance. But the last 60 years of stupidity are bringing us back to scarcity again.

http://en.wikipedia.org/wiki/Surplus_value

I am about ready to put our economists up against a wall and shoot them.

blkdevillol

umbra

a brief comment, I thought the thinking of many Marxists / communists was to marry capitalism and the aforementioned into a new synergy-economic? ( half remembered ramblings of an old drunken tutor).





p.s. i'm seriously considering taking a new career direction...selling 'modern' art to the rich and the stupid...

if a dead shark cut in two can fetch up to six figure sums well the skys the limit..

.lol.

Think Banksy has the market cornered;



.lol.

Intresting stuff Umbra, have you thought about writing a book?

Actually I started one about a year ago but I seemed to start rambling at about 50 pages. I just had an idea last night about modifying the theme and direction.

What amazes me about so many books is that the authors can write 300 pages about concepts that are worth about 20. We have to read too much to learn too little.

um

It would be nice to imagine a new form of economics that took into account 21st century advances…i.e. the virtual abolition of abject poverty ( in the west atleast) . instead of forcing us to use the economics that haven’t changed much in the last hundred/ two hundred years.. the only problem with that is the last set of ‘radical economics ‘marxism’ and communism was treated like the plague. Even small scale communes are treated with suspicion. The real question is

When will the climate be susceptible to a new form of economics that doesn’t include 19th century thinking, i.e. less than 10% of the population control the rest and have a better life than the majority.

PARECON

Participatory economics, or parecon for short, is an economic vision proposed as an alternative to capitalism, and also what has historically gone under the label socialism.

i thought socialism was meant as a not an alternative but as a supplimentary form of economics that could be married to capitalism to form a sort of synergy ...?

ParEcon: Life After Capitalism « Bala Fria


That "equity, solidarity" stuff is just another version of "everybody is supposed to be good and play nice" but in actual fact there are plenty of people that don't want to be good and play nice. What they CLAIM is CAPITALISM is just a rationalization of how they want the system to work. Capitalism just means private ownership of resources. There is nothing about capitalism that says everyone should not at least be encouraged to understand accounting or that it should not be mandatory in the schools. But when do you ever hear that from anybody?

Game theory better explains what is going on but you need to include social control going on in the schools to indoctrinate children into thinking the right thoughts. What do you want to BE when you grow up? You are your job. But the more NET WORTH you have the less you need a job. No one tells us to concentrate on net worth.

Depreciation is bad for your net worth and planned obsolescence amounts to planned depreciation. So if everyone understood accounting they would be more likely to notice that depreciation. Of course the economics profession can hardly claim what they are doing is a science by not talking about that depreciation. I am estimating Americans have lost TEN TRILLION DOLLARS on that junk since 1945. Since machines inevitably wear out the depreciation cannot be eliminated. But changing the design of the cars every year makes them more expensive and I don't believe for a second they are designed to last as long as possible. So I am guessing that ten trillion could have been cut in half. That would have reduced interest payed on car loans, reduced insurance costs and probably reduced maintenance costs as well.

So it comes down to how we teach children to think about technology and economics. In the 80's I watched a Black man in his 40's try to talk another Black man in his early 20's into not buying a new car. It was kind of funny to watch. The young man had his back against the wall and just kept shaking his head and looking passed the older man. There ain't much we can do about these well trained consumers, at least until the next system crash.



How can economists with degrees from Harvard, the University of Chicago and the London School of Economics not know about planned obsolescence and the depreciation of that junk this long after the moon landing? So how can it not be incorporated into their scientific economic theories?

Harvard University Press: Made to Break : Technology and Obsolescence in America by Giles Slade

um

That kinda describes the socialism found in the old Soviet Union et al...State Capitalism going under the name socialism. And I guess you could also argue that state provision of welfare (education, health, pensions) Germany and Britian was what you described.

However that is not what 'socialism' is meant to be. But the quote states that Parecon is an alternative to Capitalism and Socialism.